A rigorous technical analysis by Google engineers has found fundamental flaws in the work of several click fraud consultants Ã¢â‚¬â€œ flaws that help explain why widely quoted estimates of the size of the click fraud problem are exaggerated. We would like to share this research so that advertisers can be aware of these problems and so these consultants can use the information to improve their services.

The report includes an indictment of AdWatcher, ClickFacts, and Click Forensics. Tom Cuthbert of Click Forensics was on the panel and he shot back with this site: www.resonableisnotenough.com — a reference to the Tuzhilin report, which found that Google’s effort to combat click fraud is “reasonable”:

There is a solution available. It does not ruin pay per click advertising as we know it, in fact it breeds trust. It is technically possible and is based on a process that has worked successfully in traditional media for many years. It has been built and is ready to roll. It even allows the search providers to remain the final arbiter while giving advertisers a sense of comfort.

You can help solve the problem of click fraud by working with industry organizations, search providers and joining our Network. While Ã¢â‚¬Å“reasonableÃ¢â‚¬Â� is not enough, it is a step in the right direction. You have my commitment that Click Forensics will continue to work together with advertisers, industry organizations, search providers and smart guys like Alex. We will remain focused on realistic solutions that benefit the entire industry. Together we can build trust and continue to grow the pay per click advertising industry.

John Slade, Senior Director of Global Product Management at Yahoo, made an effort to redirect the discussion to the “bright side,” i.e. the industry council that was formed with IAB and Media Ratings Council to come up with a standard definition of clicks and click fraud.

Jessie Stricchiola of Alchemist Media Inc. drilled down to the core issue — even if there was a industry standard definition of clicks and click fraud on the table right now, the foxes would still be guarding the hen house because Google, Yahoo, etc. will still be the final arbiters of whether an advertiser has to pay for a click.

John Battelle reported on the Google report this morning, which was embargoed until 9AM, the time of the SES click fraud panel. John saw in the report the gloves coming off that we saw live on the panel:

Wow, the document reads far more combative than I thought it would. It’s more of an indictment of the nascent click fraud detection industry, and three firms in particular are called out.

Shuman Ghosemajumder brandished the report like a trial lawyer out for an indictment — despite many efforts to cut the tension in the moment, it was clear that there’s a hard gravel road to getting everyone in the click ecosystem to work together for its long-term survival.

The increase in acrimony makes the comparison I drew with Nielsen and TV advertising all the more apt.

The long-term survival of the click ecosystem is going to depend on the emergence of an objective third party that can arbitrate the situation. I keep coming back to the Catch 22 that Tuzhilin pointed out:

An operational definition [of click fraud] cannot be fully disclosed to the general public because of the concerns that unethical users will take advantage of it, which may lead to a massive click fraud. However, if it is not disclosed, advertisers cannot verify or even dispute why they have been charged for certain clicks.

Even with all the data, defining fraudulent “intent” will never be clear cut — but unless the full data set, i.e. advertiser and publisher data, is arbitrated by a third party, the situation is poised to deteriorate as advertisers get more savvy (and more unhappy) and Google (and others) consider more aggressive steps.

(See Auditing Paid Listings & Click Fraud Issues on the SES agenda for overview of the panel and who was on it.)